Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

The Regal Cycle Company manufactures three types of bicycles-a dirt bike, a mountain bike, and a racing bike. Data on sales and expenses for

image

The Regal Cycle Company manufactures three types of bicycles-a dirt bike, a mountain bike, and a racing bike. Data on sales and expenses for the past quarter follow. Sales Variable manufacturing and selling expenses Contribution margin Fixed expenses: Advertising, traceable Depreciation of special equipment Salaries of product-line managers Allocated common fixed expenses Total fixed expenses Net operating income (loss) "Allocated on the basis of sales dollars Total Dirt Bikes $ 926,000 472,000 454,000 $ 268,000 111,000 157,000 Mountain Bikes $ 402,000 207,000 195,000 Racing Bikes $ 256,000 154,000 102,000 69,900 8,200 40,800 20,900 43,600 20,500 7,500 15,600 114,500 40,800 38,500 35,200 185,200 53,600 80,400 51,200 413,200 123,100 167,200 122,900 $ 40,000 $ 33,900 $27,800 $ (20,900) Management is considering discontinuing the racing bikes. The special equipment used to produce racing bikes has no resale value and does not wear out Required: 1. What is the financial advantage (disadvantage) per quarter of discontinuing the Racing Bikes? 2. Should the production and sale of racing bikes be discontinued?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Financial Accounting Tools for business decision making

Authors: Paul D. Kimmel, Jerry J. Weygandt, Donald E. Kieso

6th Edition

978-1119191674, 047053477X, 111919167X, 978-0470534779

More Books

Students also viewed these Accounting questions